Capital Budgeting: An Important Factor in a Company's Survival and Future

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Capital Budgeting Deciding if it is time to buy a new car can certainly be influenced by the amount of money that will be tied up for the next several years. For the average person, it could be a very precarious decision, especially with the volatility of the economy. There are many factors to consider when making major purchases such as time, money, resale value, and overall necessity. Whether it is a personal budget or a budget for a multi-million dollar company, trying to predict what will happen in the future will always have it’s risks. However, it is an important aspect of a company’s survival and the overall success in the future. As stated in Corporate Finance by Ehrhardt and Brigham, capital implies long-term assets that…show more content…
Even though the Zune came into the market much later, it’s failure would certainly make one question the amount of research that was done because at that time Apple already had a huge position in the market. The precise nature of a corporation’s capital investments decides what production volume the corporation is competent to handle, how financially efficient and profitable it will be, and even how it determines its pricing strategies. The cost efficiency and operational efficiency that the corporation as a whole, experiences are essentially influenced by its capital budgeting decisions. In general, the capital budgeting process can have an impact on if a company can acquire new equipment, replace equipment, expand their campus, develop new products and perform necessary research for new products (Sullivan & Sheffrin, 2005, p. 375). In order to do any of these, huge amounts of resources must be accounted for. In the end, investors, employees and stockholders will certainly benefit. It is important to remember that while a corporation determines what they invest in and where their money goes, investors do not usually have the same influence. Additionally, nothing is done for free, even the analysis of potential projects costs money and many of them never materialize (Ehrhardt & Brigham, 2011, p. 382). There can be numerous criteria that determine which capital budgeting project is selected. Some of these factors are the urgent need

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